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Compliments  of  the 
Academy  of  Political  Science 


OUR  SOUTH  AMERICAN  TRADE 


BV 

WILLIAM  R.  SHEPHERD 


REPRINTED  FROM  POLITXCAL  SCIENCE  QUARTERLY 
Vol.  XXIV.,  No.  4 


BOSTON 

iui.i      !II[)  BY  GINN&  COMPANY 

1909 


OUR  SOUTH  AMERICAN  TRADE 


BY 

WILLIAM  R.  SHEPHERD 


REPRINTED  FROM  POLITICAL  SCIENCE  QUARTERLY 
Vol.  XXIV.,  No.  4 


BOSTON 

PUBLISHED  BY  GINN  &  COMPANY 

1909 


OUR  SOUTH  AMERICAN  TRADE 

AS  a  means  of  acquiring  and  spreading  information  about 
distant  lands  there  is  nothing  so  effective  as  commerce. 
Such  a  statement  may  be  the  expression  of  a  truism,  but 
for  the  purposes  of  the  present  article  it  is  one  worth  empha- 
sizing. In  the  backwardness  of  the  trade  of  the  United  States 
with  the  several  republics  of  South  America  lies  the  reason  for 
most  of  our  ignorance  about  them.  To  the  growth  and  pros- 
perity of  those  republics  foreign  capital  and  foreign  immigration 
are  quite  as  indispensable  as  they  have  been  to  our  own  national 
development.  This  is  another  truism  that  has  its  value.  The 
results  of  private  investigation,  the  reports  of  consuls  and  other 
public  agents  and  the  series  of  publications  issued  by  the  South 
American  governments  themselves  have  described  the  resources 
of  their  respective  territories  and  have  indicated  the  facilities 
offered  to  foreign  enterprise  so  elaborately  as  to  make  the 
demand  for  capital  and  immigration  known.  On  the  other 
hand,  the  actual  experience  gained  in  the  work  of  introducing 
these  factors  of  progress  has  brought  with  it  something  more 
than  pecuniary  profits.  It  has  conferred  a  benefit  upon  the 
South  American  countries  in  helping  to  remove  the  obstacles 
that  have  checked  their  national  advancement.  In  this  process 
the  United  States  is  peculiarly  fitted  to  play  an  important  r61e. 
Why  our  energies  have  been  employed  elsewhere,  and  how 
they  may  be  turned  in  due  measure  to  the  southern  continent, 
are  but  special  phases  of  the  general  problem. 

From  the  standpoint  of  relatively  undeveloped  resources,  the 
conditions  prevailing  in  the  republics  of  South  America  bear  a 
much  closer  resemblance  to  those  found  in  the  United  States 
than  they  do  to  the  economic  circumstances  of  the  majority  of 
the  European  countries.  As  we  have  made  our  resources 
abundantly  fruitful,  so  have  we  evolved  an  attitude  of  mind  and 
a  number  of  ideas,  practices  and  institutions  that  may  be  said 
to  characterize  us  as  a  nation.  A  due  enlargement  of  trade  rela- 
tions with   our   South  American  neighbors  would    afford    the 

667 


668  POLITICAL  SCIENCE  QUARTERLY  [Vol.  XXIV 

opportunity  for  a  corresponding  extension  among  them  of  what- 
ever has  been  of  value  in  our  social,  economic,  intellectual  and 
political  training.  Should  we  be  able,  indeed,  to  work  out  and 
to  apply  the  qualities  and  methods  needful  for  the  accomplish- 
ment of  so  useful  an  object,  the  South  Americans  on  their  part 
might  learn  to  trust  the  United  States  more  fully  and  to  foster 
the  cause  of  Pan- Americanism  more  actively  than  is  now  the 
case. 

With  this  broader  view  of  the  bearings  of  our  South  Ameri- 
can trade  in  mind,  an  elementary  study  of  it  may  conveniently 
begin  with  an  account  of  the  commercial  situation  in  the  con- 
tinent at  large.  Then  the  special  circumstances,  the  national 
policies,  the  individual  traits  and  the  business  methods  of  the 
peoples  of  Europe  who  are  chiefly  concerned  in  the  economic 
development  of  South  America  will  be  described  and  inci- 
dentally compared  with  the  corresponding  characteristics,  in 
these  respects,  of  the  people  of  the  United  States.  From  each 
of  these  sources  in  turn  certain  general  causes  of  our  failure  to 
obtain  thus  far  our  due  share  in  the  trade  of  the  southern  con- 
tinent will  be  brought  out.  Lastly,  an  attempt  will  be  made  to 
show  how  our  trade  with  South  America  may  be  enlarged.  In 
the  account  that  follows,  however,  no  concrete  examples  will  be 
furnished  of  the  lines  of  American  goods  for  which  a  demand 
exists,  or  might  be  created,  in  South  American  markets;  nor 
will  any  comparison  be  offered  between  the  prices  of  American 
and  those  of  European  products.  Matters  of  this  kind  require 
a  technical  treatment  such  as  a  business  expert  alone  may  give. 
A  discussion  of  them  would  hardly  fall  within  the  scope  of  an 
article  which  proposes  simply  to  emphasize  a  number  of  primary 
reasons  for  the  backwardness  of  our  trade  with  South  America 
and  to  put  forth  certain  suggestions  for  its  improvement.  The 
bases  upon  which  the  several  statements  rest  are  derived  in  part 
from  opinions  expressed  by  South  Americans  themselves,  as 
well  as  by  American  exporters  alive  to  the  situation,  and  in 
part  from  personal  observations  made  by  the  writer  during  the 
course  of  recent  visits  to  the  principal  countries  of  the  southern 
continent. 


No.  4]  OUR  SOUTH  AMERICAN  TRADE  669 

It  needs  but  a  glance  at  statistics  to  show  that  the  main  cur- 
rents of  South  American  trade  flow  east  and  west,  to  and  from 
Europe  and  not  to  and  from  the  United  States.  While  the 
total  commerce  of  the  several  countries  of  the  southern  conti- 
nent exceeds  one  billion  three  hundred  million  dollars  a  year,  the 
share  of  the  United  States  in  that  commerce  is  less  than  one- 
sixth.  Our  exports  to  South  America  fall  short  of  our  imports 
by  upwards  of  seventy  million  dollars,  and  constitute  only  about 
four  and  a  half  per  cent  of  our  total  exports.  For  the  existence 
of  this  trend  of  traffic  adverse  to  us,  the  circumstances  of  geo- 
graphical position,  habits  of  association  and  the  nature  of  many 
of  the  commodities  exported  from  that  continent  are  all  re- 
sponsible. The  countries  extending  along  the  east  coast  face 
Europe  and  lie  practically  as  near  to  it  as  to  the  United  States. 
Advantages  of  location,  strengthened  by  favorable  conditions  of 
climate  and  soil,  have  made  their  relations  with  the  old  world 
very  close.  The  republics  on  the  Pacific  side  of  the  continent 
are  also  quite  as  near  to  Europe  as  to  the  United  States.  Shut 
off  in  great  measure  by  the  wall  of  the  Andes  and  pre- 
vented by  other  obstacles  from  attaining  so  rapid  a  development 
as  the  states  to  the  eastward,  they  have  come  to  be  even  more 
dependent  upon  their  European  connections.  Nor  has  the  com- 
munication recently  established  between  Asia  and  the  west  coast 
of  South  America  by  means  of  a  Japanese  line  of  steamships 
led  as  yet  to  any  marked  change  in  the  customary  eastward 
direction  of  the  west-coast  trade.  Even  in  the  case  of  the  two 
northern  republics,  Colombia  and  Venezuela,  which  lie  nearer 
to  the  United  States  than  to  Europe,  the  commercial  advan- 
tages thus  afforded  us  have  been  largely  offset,  as  we  shall  see, 
by  the  operation  of  other  forces.  Furthermore,  it  should  be 
remembered  that  the  population  of  the  several  republics  has 
been  greatly  increased  by  immigration  from  Europe.  Familiar 
with  the  products  of  their  native  lands,  the  newcomers  naturally 
prefer  such  products  to  articles  brought  from  other  countries 
and  maintain  a  constant  demand  for  them,  unless  powerful  in- 
ducements to  the  contrary  are  made  effective.  The  South 
American  states,  finally,  export  great  quantities  of  mining  and 
agricultural  products  similar  to  those  which  form  the  chief  ele- 


6/0  POLITICAL  SCIENCE  QUARTERLY  [Vol.  XXIV 

ments  in  our  own  export  trade.  Since  these  products  find  in 
Europe  the  ready  market  which  they  cannot  possibly  secure  in 
the  United  States,  it  follows,  as  a  foregone  conclusion,  that 
where  the  goods  are  sold  corresponding  purchases  will  be  made. 

This  topic  of  the  trend  of  South  American  trade  suggests  a 
brief  account  of  the  transportation  system  upon  which  it  de- 
pends. Along  the  north  coast  of  the  continent,  along  the 
east  coast  between  Para  and  Buenos  Ayres,  and  on  rivers 
like  the  Amazon,  the  La  Plata  and  the  Parana,  the  ship- 
ping facilities,  in  the  main,  are  satisfactory.  On  the  west  coast 
the  service  is  not  so  good.  Until  recently  it  was  furnished 
chiefly  by  two  lines  of  steamers,  one  British,  the  other  Chilean. 
The  companies  owning  them  had  in  operation  an  agreement 
that  fixed  the  sailing  schedules  and  the  freight  and  passenger 
rates.  Of  these  arrangements  it  need  only  be  said  that  the  for- 
mer was  about  as  much  honored  in  the  breach  as  the  latter  in 
the  observance.  The  steadily  growing  competition  of  the  Ger- 
man "  Kosmos  Line,"  however,  has  now  put  the  Chilean  line  out 
of  business  and  seriously  threatens  the  traffic  of  the  British  line. 

On  land  the  system  of  transportation  in  South  America,  tak- 
ing the  continent  as  a  whole,  is  quite  defective.  In  many  of 
the  mountainous  and  tropical  regions  of  the  interior  and  even 
in  some  portions  of  the  low-lying,  temperate  areas  of  the  south, 
railways  are  practically  non-existent.  Only  the  Argentine  Re- 
public, Chile  and  certain  parts  of  eastern  and  southern  Brazil 
possess  anything  like  railway  systems.  Even  these  are  insig- 
nificant in  extension  when  compared  with  the  huge  areas  yet  to 
be  covered.  The  transcontinental  railway  through  the  Argentine 
Republic  and  Chile  awaits  the  completion  of  the  tunnel  under 
the  Andes,  and,  except  for  the  lines  running  from  those  coun- 
tries and  from  Peru  into  Bolivia,  there  are  no  international 
lines  whatever.  All  the  other  railways  on  the  continent  are 
short  lines,  stretching  from  the  seaports  a  few  miles  into  the  in- 
terior. The  result  is  that  throughout  most  of  South  America 
the  modes  of  overland  transportation  are  as  primitive  as  they 
were  in  colonial  days.  Pack  animals,  ox-carts  and  human 
carriers  have  to  be  brought  into  requisition.  Though  the  rate 
of  speed  is  necessarily  very  slow,  the  carrying  capacity  in  one 


No.  4]  OUR  SOUTH  AMERICAN  TRADE  671 

form  or  another  is  surprisingly  great.  Almost  any  article  from 
a  piano  to  a  two-ton  telescope  can  be  borne  through  the  jungles 
and  up  the  steep  mountain-passes.  So  far  as  the  pack  animals 
themselves  are  concerned,  the  usual  limit  of  the  burden  which 
can  be  borne  by  an  ox  is  400  pounds,  and  of  that  which  can  be 
placed  on  a  mule,  250  pounds.  A  donkey  or  a  llama  will  carry 
from  100  to  150  pounds.  This,  however,  does  not  mean  dead 
weight.  On  the  contrary,  the  load  has  to  be  put  up  and  ad- 
justed so  that  about  one-half  of  it  will  fall  on  either  side  of  the 
animal.  When  the  object  is  too  heavy  or  too  unwieldy  for  the 
beasts  of  burden  to  carry,  it  is  slung  on  poles  and  borne  on  the 
backs  of  men. 

Any  needless  deviation,  therefore,  from  the  rule  of  packing 
and  adjustment  by  reason  of  weight  or  size  means  a  correspond- 
ing increase  both  in  the  difficulties  of  transportation  and  in  the 
freight  charges.  Assuming  that  the  goods  are  in  proper  form 
and  are  entrusted  to  experienced  freighters,  the  risk  of  loss  or 
injury  is  not  so  imminent  as  it  might  seem.  The  very  existence 
of  the  risk,  nevertheless,  adds  materially  to  the  insurance  rates ; 
and  in  all  cases  the  freights  charged  for  such  primitive  modes 
of  carriage,  to  say  nothing  of  those  exacted  by  the  vessels  ply- 
ing on  many  of  the  rivers  of  South  America,  are  bound  to  be 
far  in  excess  of  what  is  demanded  for  transportation  by  sea. 

Turning  now  to  a  description  of  the  customs  regulations,  it 
should  be  said  that  the  duties  levied  in  South  American  ports 
are  more  commonly  specific  than  ad  valorem,  the  weight  being 
determined  strictly  in  accordance  with  the  metric  system.  The 
tariff  schedules  themselves  are  often  complicated  and,  unless 
followed  very  carefully,  may  cause  articles  to  be  taxed  much 
higher  than  the  class  to  which  they  properly  belong.  Special 
duties  or  surtaxes  are  levied  at  times  on  certain  commodities, 
even  though  such  duties  may  not  be  mentioned  in  the  schedules 
directly  under  the  technical  headings  of  the  goods  in  question. 
Some  classes  of  merchandise,  like  oil  and  its  products,  lumber, 
machinery,  construction  material  and  agricultural  implements, 
which  are  imported  regularly  and  in  large  quantities,  are  not  so 
subject  as  other  goods  to  delays  and  hazards  at  the  port  of 
entry.     Besides  the  import  duties  as  such,  there  are  certain 


6/2  POLITICAL  SCIENCE  QUARTERLY  [Vol.  XXIV 

Other  charges  to  be  met,  as,  for  example,  port,  dock  and  ware- 
house dues,  the  cost  of  cartage  and  fees  for  chemical  analyses. 
Each  of  these  naturally  has  to  be  considered  with  reference  to 
the  regulations  prevailing  in  the  state  concerned.  Still,  after 
the  entire  expense  of  bringing  the  goods  into  the  country  is 
figured  up,  the  total  is  rarely  excessive. 

Regarding  the  commercial  attitude  and  business  usages  of  the 
South  Americans,  it  must  be  admitted  that  in  all  of  the  repub- 
lics certain  classes  of  persons  are  to  be  found  who,  actuated  by 
the  old,  familiar  spirit  of  "  knownothingism,"  view  with  dis- 
favor and  apprehension  the  introduction  of  foreign  capital  and 
the  inpouring  of  European  immigrants.  The  entrance  of  large 
amounts  of  capital  from  the  United  States  in  particular,  these 
persons  appear  to  think,  might  afford  an  easy  pretext  for  armed 
intervention  on  the  part  of  the  "  Colossus  of  the  North,"  when- 
ever its  schemes  of  territorial  expansion  bring  the  countries  of 
South  America  within  their  scope.  Prepossessions  of  this  sort, 
however,  are  not  commonly  influential.  On  the  contrary,  a 
marked  desire  for  the  introduction  of  American  capital  exists 
in  practically  all  of  the  republics.  Not  only  is  its  value  for  the 
purpose  of  developing  natural  resources  well  understood,  but 
there  is  also  a  shrewd  notion  afoot  of  the  additional  benefit  that 
would  proceed  from  a  cheapening  of  capital  were  the  American 
commodity  to  be  placed  in  effective  competition  with  the  British 
and  the  German.  On  the  other  hand,  the  general  principle  of 
competition,  as  applied  in  particular  to  the  sale  of  foreign 
goods,  either  purchased  outright  or  sold  on  commission,  is  not 
so  warmly  welcomed  by  the  average  business  house  in  South 
America.  Accordingly,  when  it  undertakes  to  handle  such 
goods,  it  is  apt  to  demand  an  exclusive  right  to  their  sale  and 
looks  askance  at  any  attempt  to  supply  a  competitor  with  the 
same  products. 

That  the  great  industrial  and  commercial  enterprises  of  the 
southern  continent  are  controlled  almost  exclusively  by  Euro- 
peans and  Americans  is  a  circumstance  not  due  altogether  to 
the  fact  that  the  capital  required  for  their  initiation  and  de- 
velopment has  come  from  outside  of  South  America  itself. 
Viewed  as  a  whole,  the  South  Americans,  whatever  their  nation- 


No.  4]  OUR  SOUTH  AMERICAN  TRADE  673 

ality,  lack  the  business  instinct  of  the  Americans,  the  Germans 
and  the  English.  Some  of  the  more  prominent  mercantile 
houses  are  familiar  enough  with  modern  methods.  Close  stu- 
dents of  their  European  masters  and  willing  to  learn  from 
Americans  as  well,  the  members  of  such  firms  strengthen  their 
acquaintance  with  the  present  requirements  of  business  by  visit- 
ing the  trade  centers  of  Europe  and  the  United  States.  The 
average  South  American  merchant,  however,  is  cautious  and 
conservative,  after  the  manner  of  his  Spanish  or  Portuguese 
ancestors.  Invariably  courteous  in  his  bearing  and  often  for- 
mal and  punctilious  to  a  degree,  he  expects  a  like  treatment  in 
return.  He  is  not  quick  to  perceive  the  advantage  involved  in 
buying  an  article  that  has  the  element  of  novelty  as  its  chief 
recommendation.  Instead,  he  is  disposed  to  prefer  that  which 
he  knows  by  long-continued  usage,  and  when  the  familiar 
article  is  brought  from  abroad  he  wants  it  precisely  in  the  form 
to  which  he  is  accustomejl. 

Among  South  American  business  men,  furthermore,  promises 
of  performance  on  the  morrow  that  is  long  in  coming  are  apt 
to  be  frequent.  They  recall  the  phrase  of  the  witty  Frenchman, 
who  remarked  that  the  only  Spanish  expression  which  was 
more  common  than  manana  (tomorrow)  was  pasado  manana 
(day  after  tomorrow).  So  far  as  such  promises  refer  to  pay- 
ments and  to  credits,  ancestral  tradition  is  not  alone  responsible 
for  the  slowness  of  the  one  or  for  the  length  of  time  demanded 
in  the  case  of  the  other.  The  circumstance  itself  is  not  unusual 
in  countries  relatively  undeveloped,  where  there  may  be  an 
abundance  of  natural  products  accompanied  by  a  scarcity  of 
ready  money  to  meet  demands  on  short  notice. 

The  several  practices  under  discussion  have  incited  the 
charge,  so  often  heard  in  the  United  States,  that  the  rank  and 
file  of  South  American  business  men,  if  not  positively  dishonest, 
are  at  least  as  dilatory  and  unprogressive  as  the  governments  of 
their  respective  countries  are  unstable  and  corrupt.  Pure 
ignorance,  of  course,  has  something  to  do  with  fomenting  this 
charge,  but  it  is  based  mainly  on  the  assertions  of  two  classes 
of  Americans.  The  first  is  made  up  of  those  who  have  failed 
in  some  enterprise  of  dubious  virtue,  and  who  then  proceed  to 


674  POLITICAL  SCIENCE  QUARTERLY  [Vol.  XXIV 

publish  rancorous  articles  or  books  about  the  alleged  ill-treat- 
ment that  they  have  received.  The  second  class  is  represented 
by  a  few  great  business  houses  which  control  the  bulk  of  our 
export  trade  to  South  America.  Handling  this  trade  with  all 
the  skill  that  it  demands,  and  hence  free  from  the  faults  to 
which  attention  will  later  be  called,  they  frighten  away  possible 
competitors  by  availing  themselves  of  favorable  opportunities 
to  exaggerate  the  difficulties  that  lie  in  the  way  of  its  extension. 
From  this  sketch  of  the  commercial  conditions  prevailing  in 
South  America  as  a  whole,  let  us  turn  to  an  examination  of  the 
circumstances  peculiar  to  certain  of  the  European  states,  which 
have  induced  and  enabled  these  states  to  develop  so  fully  their 
trade  relations  with  that  continent.  It  is  well  known  that  the 
chief  competitors  of  the  United  States  in  the  commerce  of  South 
America  are  Germany  and  Great  Britain.  These  countries 
opened  their  markets  in  that  part  of  the  world  at  a  time  when 
we  were  devoting  our  energies  to  the  development  of  the 
enormous  resources  of  our  own  land,  and  later  they  spread  those 
markets  industriously  while  we  were  busied  in  promoting  our 
trade  with  Europe  and  Asia.  Germany  and  Great  Britain, 
therefore,  had  the  good  fortune  of  being  first  on  the  ground. 
They  possessed  and,  to  a  large  extent,  still  possess  another 
signal  advantage  over  us,  namely,  an  abundance  of  compara- 
tively cheap  labor,  which  enables  them  to  keep  the  prices  of 
their  commodities  proportionately  low.  Having  huge  popula- 
tions to  sustain  within  very  limited  areas,  their  natural  resources 
have  undergone  practically  as  much  exploitation  as  they  will 
bear.  Accordingly,  in  the  absence  of  business  opportunities  at 
home,  thousands  of  Germans  and  Englishmen  are  compelled  to 
emigrate.  The  impulse  affects  those  of  mediocre  capacity,  who 
may  be  content  to  struggle  along  as  they  are,  far  less  than  it 
does  the  men  whosctalents  are  commensurate  with  their  ambi- 
tions. As  a  rule,  therefore,  the  Germans  and  the  Englishmen 
who  engage  in  foreign  trade  are  those  best  fitted  to  cope  with 
new  conditions  in  other  parts  of  the  world,  and  their  migration 
is  bound  to  continue  so  long  as  the  situation  in  their  respective 
countries,  and  the  success  attending  their  activities  in  South 
America  or  elsewhere,  demand  it. 


No.  4]  OUR  SOUTH  AMERICAN  TRADE  675 

Germany  and  Great  Britain,  furthermore,  are  primarily  man- 
ufacturing nations.  Neither  of  them  is  able  to  produce  food 
and  other  commodities  in  quantities  sufficient  for  home  con- 
sumption or  raw  material  enough  to  supply  its  mills  and  factor- 
ies. On  the  other  hand  the  output  of  their  manufacturing  in- 
dustries is  greatly  in  excess  of  the  domestic  consumption.  It 
follows  that  both  states  have  to  seek  foreign  markets  and  that, 
in  order  to  secure  them,  special  means  must  be  employed  to 
facilitate  the  processes  of  export  and  import. 

Circumstances  like  these  explain  why  Germany  and  Great 
Britain  have  developed  so  largely  their  instrumentalities  of  traffic 
with  South  America.  They  have  built  steamships  and  sailing 
vessels ;  they  have  established  banks  and  increased  the  postal 
conveniences ;  they  have  invested  capital  in  countless  industrial 
concerns,  of  which  mining,  railways,  street  traction,  light  and 
power  plants,  water  works  and  manufacturing  establishments 
are  but  a  few  examples ;  and  their  purely  mercantile  enterprises 
are  legion.  At  the  same  time  their  tariff  schedules  and  their 
navigation  laws,  as  well  as  their  business  habits,  have  undergone 
modification  to  meet  the  exigencies  of  the  South  American 
market  and  to  satisfy  both  the  needs  and  the  demands  of  the 
South  American  customer.  Naturally  enough  all  this  has 
served  to  win  the  confidence  of  the  South  American  and  to  im- 
bue him  with  a  conviction  that  the  European  merchants  are 
sincerely  interested  in  his  welfare. 

That  precisely  the  reverse  of  the  conditions  which  prevail  in 
Germany  and  in  Great  Britain  obtains  generally  in  the  United 
States  requires  no  lengthy  explanation.  Our  own  trade  cur- 
rents, like  those  of  South  America,  have  flowed  east  and  west. 
We  have  watched  with  satisfaction  the  American  "  invasion  "  of 
both  Europe  and  Asia,  and,  in  proportion  as  the  sale  of  our 
commodities  has  netted  a  fair  amount  of  profit,  we  have  fos- 
tered our  business  interests  in  those  continents.  Favored  with 
astounding  success  eastward  and  westward  and  enjoying  a  huge 
and  lucrative  market  at  home,  we  have  become  relatively  ob- 
livious to  the  fact  that  the  trade  of  a  great  region  to  the  south- 
ward is  falling  a  prey  to  the  European  '•  invader."     Indeed,  we 


5^6  POLITICAL  SCIENCE  QUARTERLY  [Vol.  XXIV 

appear  to  think  that  the  United  States  has  no  particular  need  of 
South  American  commerce.  Our  disbeHef  in  this  respect  finds 
expression  in  the  oft-repeated  assertion :  **  Whenever  we  want 
the  trade  of  South  America,  we  can  easily  get  it."  Unmindful 
of  the  lesson  of  the  recent  financial  disturbance,  the  depression 
of  which  might  have  been  greatly  lightened,  if  not  offset,  by 
adequate  foreign  markets,  we  are  content  to  bide  our  time  until, 
in  order  to  forestall  the  consequences  of  overproduction,  we 
shall  be  compelled  to  seek  an  outlet  in  the  southern  continent. 
That  before  such  a  situation  arises  the  market  in  that  quarter 
may  be  preempted,  we  are  loth  to  believe  possible. 

Despite  the  fact  that  the  sources  of  information  on  South 
American  trade  conditions  are  more  ample  in  the  United  States 
than  in  the  countries  of  any  of  our  European  competitors,  they 
are  frequently  ignored.  Reports  and  compilations  of  consuls 
and  special  agents  are  sent  out  in  abundant  quantities  by  the 
national  government  only  to  be  thrown  aside.  A  like  treatment 
befalls  the  material  offered  by  the  International  Bureau  of  the 
American  Republics  at  Washington.  Our  average  business 
man  rarely  glances  at  the  monthly  bulletins  issued  by  that  office 
and  seldom  avails  himself  of  the  information  which  it  supplies. 
Whether  the  Division  of  Latin  American  Affairs  recently  es- 
tablished in  the  Department  of  State  will  fare  any  better  than 
the  official  agencies  already  existing  remains  to  be  seen.  It 
is  very  difficult,  furthermore,  to  induce  American  clerks  and 
salesmen  to  accept  positions  in  South  America.  While  a  young 
German  or  a  young  Englishman  of  fair  ability  is  willing  to  go 
there  for  a  salary  of  a  thousand  dollars  a  year,  a  young  Ameri- 
can who  is  similarly  qualified  would  demand  double  that  sum, 
so  great  are  the  advantages  offered  at  home  or  in  some  other 
part  of  the  world  where  our  trade  may  be  flourishing.  For  this 
reason  American  firms  doing  business  in  South  America  are 
often  forced  to  secure  employees  of  German  or  of  English  birth. 

By  many  persons  in  the  United  States  it  is  believed  that  our 
protective  tariff  and  our  navigation  laws  constitute  the  chief 
obstacles  in  the  way  of  a  proper  development  of  our  South 
American  trade.  They  assert  that  the  tariff  regulations  tend 
practically  to  exclude  from  this  country  many  of  the  staple  pro- 


No.  4]  OUR  SOUTH  AMERICAN  TRADE  ^yy 

ducts  of  the  southern  continent  which  otherwise  might  find  a 
market  here.  From  such  exclusion  three  injurious  conse- 
quences proceed.  The  first  is  an  appreciable  lessening  of  the 
amount  of  return  cargoes — a  circumstance  which  deprives  the 
South  American  exporter  of  the  opportunity  of  paying  for  his 
imports  from  the  United  States  in  kind.  The  second  is  the 
creation  among  South  Americans  of  a  prejudice  against  the  use 
of  our  goods,  which  has  the  effect  necessarily  of  increasing  the 
demand  for  European  commodities.  The  third  consequence  is 
the  diversion  of  South  American  products  to  Europe,  where  the 
tariff  bars  are  not  so  high  or  do  not  exist  at  all.  To  the  extent 
that  we  need  these  products,  therefore,  we  are  compelled  to 
purchase  them  at  advanced  prices  in  European  markets.  Other 
critics  there  are  who  point  to  the  fact  that  practically  all  the 
European  steamship  lines  engaged  in  South  American  trade  are 
subsidized  in  one  form  or  another  by  their  respective  govern- 
ments. They  assert,  also,  that  the  navigation  laws  of  the  United 
States,  as  now  applied,  tend  to  discourage  the  construction  of 
vessels  that  might  carry  on  commerce  under  the  American  flag, 
might  supply  what  is  felt  to  be  a  lack  of  shipping  facilities 
between  this  country  and  South  America  and  might  reduce  the 
transportation  charges  levied  by  the  Europeans  who  actually 
control  the  traffic. 

One  often  hears  the  further  complaint  that,  owing  to  the  total 
lack  of  American  banks  in  South  America,  the  business  enter- 
prises of  our  citizens  there  are  financially  at  the  mercy  of 
branches  of  European  banking  houses,  which  naturally  favor  the 
trade  of  their  parent  countries  against  our  own.  Since  pay- 
ments are  made  by  drafts  on  European  banks,  the  American 
seller  is  not  sufficiently  protected  against  the  fluctuations  of  the 
South  American  money  markets,  and  he  may  be  subject  besides 
to  excessive  charges  for  any  services  rendered.  The  fact  is 
emphasized,  also,  that  with  several  of  the  southern  republics  the 
United  States  has  no  arrangement  for  the  issue  of  postal  money 
orders.  Accordingly  the  inhabitant  of  any  of  these  republics 
who  wishes  to  order  any  article  from  the  United  States  has  to 
make  payment  through  a  European  agency.  The  delay  and 
the  expense  connected  with  such  a  transaction,  it  would  seem, 
must  tend  to  discourage  the  purchase  of  American  goods. 


678  POLITICAL  SCIENCE  QUARTERLY  [Vol.  XXIV 

On  behalf  of  those  who  uphold  these  views  it  can  hardly  be 
denied  that  European  banks  and  European  ships,  the  former 
by  exchange  and  the  latter  by  freight  charges,  collect  a  con- 
stant percentage  on  our  South  American  trade,  some  of  which 
percentage  might  be  diverted  to  our  own  shores.  That  the 
great  majority,  also,  of  the  vessels  carrying  American  goods  to 
the  southern  continent  sail  under  European  flags,  and  that  the 
foreign  banks  which  finance  American  business  operations  there 
are  European  corporations,  are  matters  worthy,  no  doubt,  of 
public  attention.  All  these  themes,  however,  involve  consider- 
ations too  elaborate  for  the  limits  of  what  is  intended  to  be 
merely  a  general  survey  of  the  whole  question.  They  are 
mentioned  here  in  order  to  show  the  necessity  for  a  scientific 
study  of  the  tariff  policy,  the  navigation  laws  and  the  financial 
facilities  of  the  United  States,  as  compared  with  those  main- 
tained by  our  chief  European  competitors.  Then  it  will  be 
possible  to  determine  the  extent  to  which  these  factors  may  be 
influential  in  retarding  the  development  of  our  South  American 
trade. 

The  most  powerful  competitor  with  whom  the  United  States 
has  to  reckon  in  the  furtherance  of  its  commercial  relations 
with  South  America  is  the  German.  If  he  was  a  dangerous 
adversary  before,  he  is  more  so  now  that  our  new  tariff  has  in- 
creased the  difficulties  of  German  exportation  to  this  country. 
For  the  disadvantage  thus  entailed  he  is  bound  to  seek  compen- 
sation in  other  markets,  and  of  these  the  South  American  is 
the  most  promising.  Our  British  competitor  there  is  much  less 
formidable.  Perhaps,  indeed,  no  phase  of  the  recent  economic 
progress  of  the  southern  republics  is  more  remarkable  than  the 
extent  to  which  German  influence  and  German  capital  are  un- 
dermining the  position  that  British  trade  and  enterprise  have 
long  enjoyed.  In  a  number  of  cases  the  names  of  the  firms  or 
corporations  concerned  may  remain  British,  but  the  practical 
strength  that  they  possess  is  German.  It  may  be  that  British 
capital  in  general  is  as  fluid  in  quality  and  abundant  in  quantity 
as  the  German  commodity  is  fixed  and  insufficient,  and  that  the 
bulk  of  the  foreign  capital  actually  invested  in  South  America 
is  still  British  in  origin,  but  the  application  and  control  of  it 
are  coming  steadily  into  German  hands. 


No.  4]  OUR  SOUTH  AMERICAN  TRADE  679 

By  the  South  Americans  themselves  it  is  often  said  that  of 
the  chief  groups  of  foreigners  engaged  in  trade  among  them, 
none  displays  so  much  business  ability  as  the  German  and  none 
so  little  as  the  American.  The  thrift  and  industry  of  the 
typical  German  are  of  course  too  proverbial  to  need  comment. 
Attention  should  be  directed  rather  to  certain  other  character- 
istics that  distinguish  his  operations  in  the  southern  republics, 
and,  it  might  be  added,  elsewhere  in  the  world  as  well.  Though 
strikingly  exemplified  in  Brazil,  the  Argentine  Republic,  Chile 
and  Peru,  where  approximately  a  million  native-born  Germans 
or  descendants  of  Germans  are  settled  and  act  as  promoters  of 
the  commercial  ambitions  of  the  Fatherland,  the  qualities  in 
question  may  be  studied  to  advantage  in  every  spot  on  the  con- 
tinent to  which  the  ubiquitous  German  has  betaken  himself. 

No  intelligent  German,  be  it  said,  would  ever  think  of  migra- 
ting to  South  America  before  he  has  acquired  a  practical 
knowledge  of  his  special  line  of  business  and  has  acquainted 
himself,  as  thoroughly  as  may  be  possible  in  advance,  with  the 
language  of  the  country,  its  customs,  its  needs  and  its  economic 
conditions  in  general.  He  learns  also  the  languages  of  his  prin- 
cipal competitors  in  that  market.  Provided  with  the  ample 
training  that  the  admirable  German  schools  of  commerce  afford 
and  gifted  with  an  unusual  degree  of  adaptiveness,  he  fits 
readily  into  his  new  surroundings.  Tactful  and  complaisant  as 
regards  native  sympathies  and  prejudices,  even  if  he  can  win  no 
more  than  the  respect  of  his  neighbors  he  yet  avoids  anything 
that  might  provoke  their  antagonism.  Rather  than  hold  him- 
self socially  aloof  he  will  marry  into  a  native  family;  but 
although  he  may  identify  himself  in  this  or  in  other  respects 
with  the  interests  of  the  country,  he  prudently  abstains  from 
undue  participation  in  its  politics.  For  the  purpose  of  increas- 
ing his  intellectual  stock  in  trade,  the  German  investigates  with 
patient  care  all  phases  of  the  commercial  and  industrial  situa- 
tion which  may  be  of  service  to  him,  not  hesitating,  if  it  seem 
necessary,  to  visit  the  remotest  sections  of  the  country.  Then, 
after  all  the  requirements  of  caution  and  deliberation  are  satis- 
fied, he  locates  his  business,  or  places  his  investment,  with  a  de- 
gree of  shrewdness  that  does  him  credit. 


68o  POLITICAL  SCIENCE  QUARTERLY  [Vol.  XXIV 

The  commercial  instinct  of  the  Germans  is  firmly  rooted. 
Time  was  when  the  English  were  known  as  the  nation  of  shop- 
keepers, equipped  with  all  the  obsequious  arts  that  distinguish 
the  craft.  Now  the  title  seems  to  be  passing  to  the  Ger- 
mans. Not  content,  however,  with  his  ability  to  please  his  cus- 
tomers and  to  keep  their  patronage,  the  German  merchant  strives 
constantly  to  improve  on  the  ways  and  means  of  doing  business 
which  he  has  learned  on  his  native  soil  or  has  acquired  in  his 
adopted  country.  From  time  to  time  he  travels  to  the  lands  of 
his  principal  foreign  competitors,  where  he  masters  the  secrets 
of  their  trade  and  manufacture.  Returning  to  the  scene  of  his 
business,  he  carefully  combines  the  knowledge  he  has  thus 
obtained  with  his  own  practical  skill  so  as  to  meet  the  demands 
of  his  clients  more  successfully  than  ever.  In  the  matter  of 
imitation  the  German  takes  rank  with  the  Japanese.  To  give 
his  customers  just  what  they  want,  and  not  what  he  thinks  that 
they  ought  to  buy,  is  one  of  his  business  ideals.  The  materials 
of  which  the  goods  are  made  may  be  of  inferior  quality,  but 
they  correspond  pretty  closely  to  the  demands  of  local  taste. 
Whenever  native  appreciation  rises  to  a  point  where  better 
materials  are  desired,  the  German  manufacturer  improves  his 
materials.  On  the  other  hand,  unlike  some  of  his  competitors, 
he  does  not  assume  that  the  mere  reputation  of  German  goods, 
or  the  utterance  of  the  talismanic  words  "  made  in  Germany," 
will  be  sufficient  to  insure  an  immediate  sale.  Instead  of  show- 
ing catalogues,  the  German  salesman  shows  the  articles  them- 
selves, and  he  is  always  prepared  to  give  a  practical  demonstra- 
tion of  their  value  and,  if  necessary,  of  the  way  in  which  they 
should  be  used.  Should  it  be  impossible  to  keep  certain  lines 
of  goods  in  stock,  he  has  in  their  stead  a  series  of  samples  or 
models,  the  completeness  of  which  reminds  one  of  the  display 
in  a  New  York  department  store.  The  result  is  that  the  pros- 
pective buyer  has  before  him  an  assortment  to  choose  from 
about  as  large  as  he  would  have  in  the  very  districts  where  the 
goods  are  produced.  Finally,  if  his  patrons  so  desire,  the 
German  grants  them  a  liberal  credit  in  the  form  and  for  the 
period  to  which  they  are  accustomed. 

This  description  of  German  characteristics,  shown  particularly 


No.  4]  OUR  SOUTH  AMERICAN  TRADE  68 1 

in  connection  with  South  American  trade,  suggests,  by  way  of 
contrast,  an  account  of  certain  traits  and  practices  too  often 
typical  of  his  American  rival.  Leaving  out  of  consideration 
the  few  great  exporting  hotises  of  the  United  States,  to  which 
allusion  has  already  been  made,  we  find  among  the  business 
men  of  this  country,  as  well  as  among  the  people  at  large,  three 
false  notions  which  check  the  growth  of  our  South  American 
commerce  beyond  the  limits  to  which  it  has  been  carried  by  the 
big  firms  in  question. 

The  first  of  these  notions  is  that  the  inhabitants  of  South 
America  are  scarcely  half  civilized.  Not  infrequently  the 
American  capitalist  declines  to  invest  his  money  in  South 
American  enterprises  because  he  believes  that  it  will  not  be  pro- 
tected. If  as  a  nation  we  knew  more  about  that  continent  and 
its  peoples,  the  injustice  of  such  an  attitude  of  mind  would  be 
apparent  enough.  British  and  German  capitalists  encounter  no 
special  difficulty  in  securing  profitable  returns  from  their  invest- 
ments, and  they  do  so  without  invoking  the  aid  of  warships  and 
without  conniving  at  revolutions.  On  the  other  hand  it  is  a  fact 
too  well-known  to  need  comment  that  the  corrupt  conduct  of 
Americans  in  many  parts  of  the  southern  continent  has  served 
to  injure  the  good  name  of  the  United  States  and  to  awaken  a 
corresponding  distrust  of  us  in  the  minds  of  the  South  Ameri- 
cans themselves. 

The  second  false  notion  is  that  the  American  way  of  doing 
business  is  necessarily  the  best  in  the  world.  Self-complacency 
and  a  sort  of  careless,  good-humored  condescension  toward  our 
European  competitors  have  been  converted,  it  would  seem,  by  a 
decade  or  two  of  brilliant  commercial  success,  into  something 
approaching  a  national  obsession.  In  common  with  this  spirit 
are  the  ideas,  first,  that  if  the  South  Americans  want  our  goods 
they  should  simply  send  for  them,  and  second,  that  anything 
will  do  for  South  America.  Both  ideas  are  responsible  for 
much  of  the  prejudice  existing  in  that  continent  against  the  use 
of  our  products.  If  orders  are  received  from  South  America, 
the  American  manufacturer  too  often  ignores  them  or  ships 
something  not  desired.  He  may  not  dispatch  goods  which  he 
knows  to  be  inferior,  as  has  been  charged  against  him,  but  not 


682  POLITICAL  SCIENCE  QUARTERLY  [Vol.  XXIV 

infrequently  he  is  slow  about  filling  orders  and  careless  or  in- 
different about  returning  articles,  especially  parts  of  machinery, 
sent  to  him  for  repair  or  replacement.  The  result  of  such  a 
procedure  is  that  no  more  orders  will  be  received  from  the 
South  American  merchant  so  treated,  although  there  may  be  a 
good  market  for  the  commodities  in  question. 

Granting,  however,  that  the  American  exporter  does  heed 
the  orders  that  come  to  him,  certain  further  defects  in  our  trade 
with  South  America  now  come  into  view.  They  appear  in  two 
main  forms.  One  of  these  is  the  unwillingness  of  the  Ameri- 
can manufacturer  to  alter  what  may  meet  the  needs  of  his 
customers  at  home  in  such  a  manner  as  to  satisfy  the  require- 
ments of  the  South  American  purchaser.  The  other  is  his  fail- 
ure to  safeguard  his  consignments  against  injury  in  transit.  A 
recital  of  the  defects  themselves  must  involve  a  retelling  of  the 
old  story  of  unintelligent  packing ;  but,  like  many  other  old 
stories,  it  may  serve  a  good  purpose  by  repetition.  Not  *•  once 
upon  a  time,"  therefore,  but  on  numerous  occasions,  be  it  said, 
goods  sent  from  the  United  States  have  been  packed  in  shapes, 
sizes  and  measures  and  in  weights  and  quantities  unusual  in 
South  America.  Pounds,  quarts  and  yards  have  no  place  in 
countries  where  the  metric  system  prevails.  Too  frequently 
does  it  happen  that  the  American  exporter  takes  out  an  insuffi- 
cient amount  of  insurance  on  his  goods.  He  does  not  mark 
the  articles  shipped  as  carefully  as  he  should.  The  indications 
as  to  form,  size,  contents  and  the  like  are  apt  to  be  omitted 
from  the  labels  or  erroneously  stated  or  wrongly  placed,  and 
the  actual  addresses  of  the  consignees  incorrectly  given  or  so 
poorly  put  on  as  to  become  obliterated  before  the  goods  arrive 
at  their  destination. 

These  defects,  however,  are  on  the  whole  less  serious  than 
the  careless  fashion  in  which  American  commodities  are  often 
prepared  for  shipment.  It  must  be  remembered  that,  before 
they  reach  their  destination,  packages  are  liable  to  a  great  deal 
of  knocking-about  in  the  course  of  transportation  by  ocean- 
going vessel,  lighter,  river-steamboat,  railway,  ox-cart,  beast  of 
burden  and  human  carrier.  Their  possible  exposure,  also,  to 
hot  and  moist  temperatures  may  easily  work  damage  both  to 


No.  4]  OUR  SOUTH  AMERICAN  TRADE  683 

covering  and  to  contents.  Nevertheless  huge  boxes,  flimsily 
constructed  of  thin  boards  and  unprovided  with  iron  straps  or 
other  means  of  security,  are  filled  with  heavy  merchandise  and 
dispatched  to  some  point  in 'South  America  only  to  be  broken 
open,  either  accidentally  in  the  varied  processes  of  transporta- 
tion, or  intentionally  by  thieving  freight-handlers.  Should  a 
machine,  for  example,  be  badly  packed,  it  is  likely  to  be  con- 
verted into  a  heap  of  scrap-iron  by  the  time  that  it  arrives  at 
its  place  of  consignment.  Or  should  any  one  of  the  parts 
of  a  machine  be  lost  in  transit,  the  South  American  import- 
ers themselves  are  apt  to  know  so  little  about  the  rest  of  it 
that  they  cannot  describe  the  missing  piece  and  hence  do  not 
send  for  a  duplicate.  Not  only  is  the  machine  in  question  ren- 
dered useless,  but  the  annoyance  and  the  pecuniary  loss  suffered 
by  the  purchaser  make  its  further  introduction  into  that  region 
quite  improbable.  At  times,  also,  the  box  or  case  is  too  large 
or  too  heavy.  It  is  quite  possible  to  crate  some  big  machine 
or  other  weighty  object  whole  and  to  put  it  aboard  a  vessel 
bound  for  South  America  just  as  if  it  were  being  sent  to  any 
part  of  the  United  States,  but  if  the  commodity  is  consigned  to 
a  point  in  the  interior  of  that  continent,  the  freight  charges 
may  roll  up  so  enormously  as  to  render  its  importation  alto- 
gether unprofitable.  On  the  assumption,  furthermore,  that 
solidity  of  packing  means  a  corresponding  increase  in  strength, 
some  American  shippers  make  their  packages  in  general  too 
heavy.  This  insures  a  substantial  addition  to  the  income  of 
the  South  American  states  from  their  import  duties,  but  it  has 
no  other  advantage. 

Given  the  qualities  accredited  to  the  American  business  man, 
his  failure  to  exhibit  them  in  South  America  seems  rather  re- 
markable. Unmindful  of  the  difference  in  speech,  he  often 
answers  in  English  letters  of  inquiry  addressed  to  him  in  some 
other  language,  and  also  sends  to  his  correspondent  elaborately 
illustrated  catalogues  printed  in  English.  Neither  the  reply  nor 
the  catalogue  is  likely  to  accomplish  any  good.  Again,  instead 
of  using  South  American  newspapers  and  magazines  for  the 
purpose,  the  American  exporter  commits  the  fault  of  advertis- 
ing in  certain  periodicals  printed  in  Spanish  and  published  in 


684  POLITICAL  SCIENCE  QUARTERLY  [Vol.  XXIV 

the  United  States,  the  circulation  of  which  is  chiefly  among  the 
American  advertisers  themselves.  Diligent  inquiry  among  busi- 
ness men  in  South  America  shows  that  such  journals,  even 
when  they  have  been  heard  of,  are  seldom,  if  ever,  looked  at. 
The  American  proprietor  of  patent  medicines,  on  the  other 
hand,  is  wiser.  He  has  learned  to  proclaim  the  extraordinary 
virtues  of  his  emulsions,  pink  pills,  electric  belts  and  elixirs  of 
life  on  the  spot,  in  the  columns  of  the  South  American  news- 
papers or  on  the  pages  of  the  South  American  magazines ;  and 
by  so  doing  he  seems  to  be  able  to  entice  credulous  humanity 
south  of  the  isthmus  to  the  use  of  his  nostrums  quite  as  surely 
as  in  the  United  States. 

When  an  American  merchant  of  the  sort  we  are  considering 
sends  out  a  traveling  salesman  to  South  America,  he  is  apt  to 
select  one  of  two  undesirable  types.  The  first  of  these  is  the 
man  who  may  be  thoroughly  familiar  with  the  details  of  the 
business,  but  who  is  unacquainted  with  any  language  save  his 
own  and  is  unfitted  by  temperament  and  by  training  to  deal 
with  South  Americans.  The  man  of  the  second  type  may  be 
able  to  speak  Spanish  or  Portuguese  and  may  be  otherwise 
adapted  or  adaptable  to  South  American  conditions,  but  he  has 
little  or  no  practical  knowledge  of  the  articles  that  he  is  sup- 
posed to  introduce.  Salesmen  like  these  often  make  the  gross 
mistake  of  imagining  that,  in  order  to  secure  a  market  for  the 
line  of  goods  which  they  represent,  they  need  simply  to  employ 
the  same  arguments  in  Buenos  Ayres  that  they  would  in  New 
York.  Knowing,  for  example,  that  the  average  American  is 
prone  to  insist  that  the  article  which  he  buys  shall  be  •*  up-to- 
date,"  as  the  phrase  goes,  they  strive  in  vain  to  convince  the 
South  American  that  what  he  has  always  used  is  not  so  good  as 
something  brand-new.  In  many  instances,  moreover,  the  Amer- 
ican salesmen  do  not  take  the  trouble  to  penetrate  into  the  in- 
terior of  the  countries  to  which  they  may  be  assigned,  but  con- 
fine their  efforts  to  the  coast  towns.  Others,  instead  of  dealing 
directly  with  the  South  American  merchants,  seek  out  some 
English  importing  house  or  some  German  establishment  of  the 
same  sort  in  which  English  is  spoken.  Through  the  medium 
of  the  salesmen,  furthermore,  or  immediately  on  the  part  of  the 


No.  4]  OUR  SOUTH  AMERICAN  TRADE  685 

American  concern  itself,  agencies  are  often  set  up  in  the  very 
headquarters  of  our  chief  competitors,  instead  of  entrusting 
them  to  native  hands.  How  greatly  the  German  or  the  English 
firm  in  question  is  benefited  by  such  an  admission  to  American 
trade  secrets  may  readily  be  conjectured.  Even  in  those  cases 
where  a  native  agency  may  have  been  created,  the  American 
house  often  injures  its  business  by  the  adoption  of  an  unwise 
policy  toward  its  representative.  It  waits  until  that  agency  has 
built  up  a  good  market  for  certain  lines  of  goods  and  then 
either  turns  over  the  further  sale  of  the  articles  to  a  branch  es- 
tablishment of  its  own  or  supplies  a  native  competitor  of  the 
original  agency  with  the  same  commodity.  Bearing  in  mind 
the  attitude  of  the  South  Americans  towards  this  sort  of  busi- 
ness practice,  whether  legitimate  or  not,  one  cannot  be  surprised 
if  the  native  agent  feels  resentful  at  what  he  regards  as  unfair 
treatment  and  seeks  to  foment  a  prejudice  among  his  countrymen 
against  the  use  of  the  articles  in  which  he  has  been  dealing. 

Three  other  defects  in  the  American  way  of  doing  business 
in  South  America  remain  to  be  mentioned.  In  the  first  place, 
it  is  not  uncommon  for  our  merchants  to  demand  that  their 
goods,  when  exported  to  a  South  American  country,  be  paid 
for  in  advance  or  immediately  on  delivery ;  or,  if  credit  is  al- 
lowed, they  grant  it  for  short  terms  only.  None  of  these  modes 
of  payment,  however,  suits  the  majority  of  South  American 
buyers :  they  call  for  long  credits  of,  say,  six  months  or  more. 
Again,  granting  that  the  terms  of  payment  are  satisfactory  to 
both  parties,  the  American  exporter  is  heard  to  complain  at 
times  of  his  inability  to  collect  the  amounts  when  due.  To 
this  it  may  be  replied  that  if  the  exporter  in  question,  ere  he 
sent  his  goods  forth,  had  taken  the  trouble  to  ascertain,  through 
the  local  banks  or  other  sources  of  reliable  information,  the  busi- 
ness and  financial  responsibility  of  his  backward  customer,  pre- 
cisely as  he  would  do  in  a  similar  case  at  home,  his  dealings 
would  have  been  confined  to  reputable  firms  or  individuals  only, 
and  his  bad  debts  would  have  been  proportionately  fewer.  At 
this  point  it  is  well  to  note,  also,  that  no  uncommon  cause  of  the 
difficulties  met  with  by  our  merchants  in  settling  their  accounts 
in  South  America  is  their  failure  to  familiarize  themselves  with 


686  POLITICAL  SCIENCE  QUARTERLY  [Vol.  XXIV 

the  monetary  systems  obtaining  in  the  various  countries  and  to 
safeguard  themselves  accordingly. 

The  third  and  last  of  the  false  notions  current  in  the  United 
States,  to  which  allusion  has  earlier  been  made,  is  the  belief  that 
the  American  article  is  the  best  in  the  world  and  must  com- 
mend itself  spontaneously  wherever  it  goes.  In  some  cases, 
perhaps,  the  belief  may  be  well  founded,  but  this  idea  of  the 
universal  superiority  of  American  materials  and  of  American 
workmanship  over  anything  of  a  like  sort  which  can  be  fur- 
nished by  Europe  is  rapidly  becoming  a  more  or  less  gratuitous 
assumption.  Not  a  few  of  our  business  men  have  begun  to 
realize  that  the  European  manufacturers,  and  notably  the  Ger- 
man, are  quite  capable  of  producing  many  classes  of  goods 
equal,  if  not  superior,  to  our  own.  At  all  events  the  question  is 
clearly  open  to  discussion,  after  one  has  observed  the  fine  qual- 
ity of  European  handiwork  and  has  also  remarked  the  readiness 
with  which  both  Europeans  and  Americans  are  learning  to  copy 
one  another's  productions.  As  examples  of  what  the  Germans 
in  particular  are  doing  in  the  latter  respect  in  South  America, 
the  cheap  imitations  of  American  articles  and  the  falsification 
of  American  trade-marks  need  only  be  mentioned.  Yet  the 
American  exporter  seems  to  make  little  effort  to  counteract  the 
underselling  that  accompanies  these  practices. 

Even  if  the  intrinsic  superiority  of  the  American  commodity, 
backed  by  the  influence  of  a  manufacturing  reputation,  be  ad- 
mitted, it  does  not  follow  that  the  South  American  buyer  will 
feel  inclined  to  recognize  such  superiority  if  the  article  costs 
more  than  something  else  of  European  origin  which  appears  to 
be  just  as  good.  The  prices  of  many  classes  of  American  pro- 
ducts are  in  fact  so  high  as  to  prevent  any  wide-spread  sale 
of  them  in  South  America.  That  more  of  our  goods  are  not 
sold  there  is  due  in  great  measure  to  the  difference  between 
American  and  European  trade  policies  and  methods.  The  use 
of  better  grades  of  materials  and  the  employment  of  more  highly 
paid  labor  in  our  manufacturing  plants  are  not  alone  responsible. 

This  study  of  prevailing  conditions  has  perhaps  been  suffi- 
ciently comprehensive  to  prepare  the  way  for  positive  sugges- 


N0.4J  OUR  SOUTH  AMERICAN  TRADE  gg^ 

tions  for  the  development  of  our  South  American  trade.  The 
broadest  and  most  obvious  suggestion,  of  course,  is  that  we  stop 
committing  the  various  faults  that  have  been  described,  and  that 
we  profit  by  the  examples  of  our  European  rivals.  Habitual 
currents  of  trade,  protective  tariffs,  navigation  laws  and  ship 
subsidies  all  apart,  we  can  secure  our  share  of  South  American 
commerce  when  the  views  and  methods  of  our  business  men 
undergo,  as  regards  this  commerce,  a  change  which  will  enable 
them  to  cope  successfully  with  their  rivals  in  general  and  with 
the  Germans  in  particular. 

Business  relations,  quite  as  much  as  other  organisms,  are 
governed  by  the  law  of  growth  and  decay.  In  order  to  be  suc- 
cessful, trading  operations  must  be  actively  promoted  and  not 
merely  suffered  to  go  on  as  automatic  processes.  Should  they 
be  managed  in  the  latter  sense,  decline  and  failure  are  bound  to 
be  the  result.  Foresight,  also,  is  one  of  the  inexorable  demands 
of  business.  Simply  because  there  is  no  immediate  and  direful 
necessity  for  a  wider  participation  in  South  American  commerce, 
we  are  not  justified  in  neglecting  to  strengthen  our  hold  upon  it. 
We  must  make  ready  now  to  meet  the  imperative  need  when- 
ever it  does  arise.  To  assume  the  sufficiency  for  all  time  of  the 
home  market  and  of  our  trade  with  Europe  and  Asia,  without 
taking  into  serious  account  the  possibility  of  a  limitation  of  the 
one  or  a  contraction  of  the  other,  is  assuredly  not  a  wise 
policy. 

Situated  geographically  as  we  are,  about  as  distant  from 
South  America  at  large  as  Europe  is,  with  the  completion  of 
the  Panama  Canal  a  question  of  the  future,  and  excluded  thus 
far  from  the  possible  advantages  of  communication  by  rail, 
there  are  three  things  that  we  ought  to  do.  The  first  is  to  get 
a  thorough  first-hand  acquaintance  with  South  American  con- 
ditions. The  second  is  to  make  a  careful  examination  of  the 
examples  set  by  our  European  competitors,  in  the  conviction 
that  we  shall  be  able  to  improve  vastly  upon  these  models. 
This  does  not  mean  that  all  we  need  to  do  is  to  imitate  the 
Germans  or  the  traders  of  any  other  nationality,  although  some 
of  the  German  qualities  might  be  taken  over  with  advantage. 
Our  third  duty  is  so  to  modify  certain  of  our  business  methods 
as  to  render  them  thoroughly  effective  in  South  America. 


688  POLITICAL  SCIENCE  QUARTERLY  [Vol.  XXIV 

While  general  admonitions  like  these  may  have  some  useful- 
ness, an  indication  of  specific  ways  and  means  of  improving  our 
trade  relations  with  the  countries  of  the  southern  continent 
would  be  of  greater  advantage.  To  take  up,  however,  each  of 
the  traits  and  methods  of  our  business  men  which  have  been 
noted  as  defective,  and  to  prescribe  for  each  defect  its  corre- 
sponding remedy,  would  be  as  great  a  waste  of  words  as  to  give 
further  laudation  to  the  traits  and  methods  of  our  European 
rivals.  Instead,  let  us  note  that  it  would  be  well  to  have  mem- 
bers of  our  exporting  firms  visit  the  South  American  coun- 
tries, and  make  their  visits  as  frequent  and  their  observa- 
tions as  careful  as  possible.  By  so  doing  they  could  render 
valuable  services  both  to  themselves  and  to  the  United  States. 
Their  study  of  South  American  conditions  at  first-hand  would 
enable  them  to  widen  their  commercial  opportunities  and  to 
bring  back  to  this  country,  not  only  technical  information, 
but  also  the  general  knowledge  about  the  southern  continent 
of  which  we  stand  so  much  in  need.  The  South  Americans, 
too,  would  more  readily  believe  that  we  are  interested  in  their 
trade  if  they  were  to  see  our  representative  merchants  coming 
in  person  to  investigate  it. 

In  conjunction  with  what  is  furnished  by  Europe  more  of  our 
available  capital  should  be  invested  in  South  America.  To  the 
extent  that  the  resources  of  the  various  republics  are  developed 
their  purchasing  power  will  be  enlarged.  When  this  result  is 
attained,  the  Americans  can  compete  with  the  Europeans  for 
the  increased  trade. 

American  banks  should  be  established  in  South  America. 
Not  only  would  such  institutions  facilitate  our  trading  ventures 
by  rendering  them  more  independent  of  European  banking 
houses,  but  they  would  yield  large  pecuniary  returns  as  well. 
The  profits  made  by  the  European  branch  banks  in  the  southern 
continent  range  from  eight  to  fifteen  per  cent  annually,  and  are 
in  some  cases  even  greater. 

Touching  now  upon  some  of  the  policies  that  the  American 
business  man  might  adopt  with  advantage  toward  his  South 
American  customers,  let  it  be  noted  first  of  all  that  he  is  bound 
to  treat  such  customers  with  as  much  regard  as  he  does  those 


No.  4]  OUR  SOUTH  AMERICAN  TRADE  689 

at  home.  If  the  South  American  buyer  calls  for  the  shipment 
of  the  goods  ordered  under  conditions  and  in  a  form  different 
from  those  to  which  we  are  accustomed,  or  if  he  asks  for  rights 
of  sale  and  terms  of  payment  unusual  in  this  country,  his  wishes 
on  all  such  points  must  be  met;  otherwise  the  more  obliging 
European  merchant  will  be  the  recipient  of  any  further  busi- 
ness. To  attain  these  ends,  the  American  shipper  should  ascer- 
tain the  precise  details  of  the  tariff  regulations  of  the  country  to 
which  the  goods  are  consigned,  and  the  formalities  connected 
with  the  preparation  of  invoices  of  shipments  which  these  regu- 
lations prescribe.  Also  he  should  keep  himself  constantly  in- 
formed of  changes  in  the  tariff  system.  The  American  exporter 
should  employ  packers  thoroughly  familiar  with  the  conditions 
of  climate  and  transportation  prevailing  in  the  country  of  desti- 
nation. Should  this  not  be  feasible,  the  technical  details  of  the 
process  may  readily  be  learned  from  the  several  government 
publications  and  other  sources  of  information  to  which  refer- 
ence has  already  been  made.  Good  packing,  however,  should 
never  be  carried  to  the  point  where  its  cost  may  exceed  the 
percentage  of  possible  loss  by  leakage  or  breakage,  for  in  so 
doing  the  price  of  the  articles  may  be  so  greatly  increased  as 
to  render  effective  competition  impossible. 

In  all  cases  where  a  reputable  South  American  firm  expresses 
a  desire  to  handle  American  goods,  with  the  understanding  that 
it  shall  enjoy  the  right  to  an  exclusive  sale  of  them  in  a  given 
locality,  the  privilege  should  be  granted ;  provided,  of  course, 
that  it  be  impracticable  to  found  there  a  branch  of  the  Ameri- 
can house  itself.  Furthermore,  whenever  asked  for,  a  liberal 
credit  should  be  extended  to  responsible  parties.  This  would 
include,  not  only  a  reasonably  long  period  through  which  the 
payments  might  run,  but  also  allowance  of  the  usual  discounts 
from  catalogue  rates,  and  a  deduction  of  the  interest  if  the 
principal  be  paid  at  the  beginning,  instead  of  at  the  expiration, 
of  the  term  agreed  upon.  It  might  be  well,  indeed,  to  intro- 
duce more  widely  into  South  America  the  plan,  so  common  in 
the  United  States,  which  provides  for  the  payment  at  the  outset 
of  a  small  fraction  of  the  purchase  price  and  permits  the  pur- 
chaser forthwith  to  enjoy  the  use  of  the  article  bought,  subject 


690  POLITICAL  SCIENCE  QUARTERLY  [Vol.  XXIV 

to  the  payment  of  periodical  instalments  extending  over  a  year 
or  more,  while  the  legal  ownership  continues  in  the  seller  until 
the  last  instalment  has  been  paid.  The  few  experiments  thus 
far  made  with  this  plan  have  been  very  successful. 

We  have  already  observed  that  the  prices  of  American  goods 
are  often  too  high  to  make  their  general  sale  in  South  America 
possible.  If  in  any  particular  case  this  be  true,  and  if  the 
standard  of  American  quality  is  to  be  maintained,  one  of  two 
things  must  be  done :  either  the  American  manufacturer  must 
bring  his  selling  price  nearer  to  cost,  contenting  himself  with  a 
large  output  and  small  profits,  or  he  must  undertake  a  sys- 
tematic campaign  of  education  among  the  South  American 
purchasers  to  show  the  special  merits  of  the  American  article  as 
compared  with  the  claims  urged  on  behalf  of  some  European 
commodity  that  competes  with  it.  But,  whether  the  prices  of 
American  goods  are  relatively  high  or  low,  the  systematic  cam- 
paign in  question  should  nevertheless  be  started  in  as  many 
different  ways  as  American  ingenuity  can  devise.  If  the  lead- 
ing South  American  firms  that  handle  our  products  and  our 
own  patent-medicine  proprietors  find  it  profitable  to  advertise 
freely  in  the  local  newspapers  and  magazines,  the  American 
exporter  in  general  has  even  greater  reason  to  do  so.  The 
advertisements  themselves  need  not  be  inserted  more  than  once 
a  month  in  the  periodical  chosen,  unless  the  subject-matter  has 
to  be  changed  frequently  or  unless  some  other  motive  to  the 
contrary  exists.  In  all  cases,  too,  where  the  nature  of  the  arti- 
cle will  justify  it,  the  advertisements  proper  should  be  amply 
supplemented  by  a  display  of  lithographs,  wall-posters  and  the 
like,  lettered  in  the  language  of  the  country,  attractive  in  form, 
and  put  up  in  the  localities  where  they  will  most  surely  attract 
public  attention.  Similarly  catalogues,  price-lists,  circulars  and 
other  varieties  of  commercial  literature  should  be  given  a  wide 
distribution  in  South  America.  To  insure  their  examination  by 
prospective  customers,  however,  they  must  be  printed  in  the 
language  of  the  country ;  and  they  should  be  clear  in  statement 
and  well  provided  with  illustrations. 

Useful  as  advertising  is  as  a  means  of  promoting  trade,  per- 
sonal solicitation  on  the  part  of  competent  salesmen,  a  system- 


No.  4]  OUR  SOUTH  AMERICAN  TRADE  691 

atic  organization  of  their  work,  an  abundant  assortment  of 
samples  and  a  practical  exhibit  of  modes  of  operating  any  par- 
ticular article  are  far  more  effective  in  the  South  American 
trade.  The  salesmen  themselves  might  well  be  divided  into  two 
classes,  more  or  less  on  the  order  of  our  consuls  and  consular  in- 
spectors. The  first  of  these  classes  would  confine  its  activities 
to  comparatively  small  areas ;  while  the  second  would  perform 
special  functions  in  a  much  larger  field.  If  the  expense  of 
maintaining  what  might  be  termed  **  salesmen-at-large  "  were  too 
great  for  any  individual  firm  to  defray,  it  might  be  borne  by  a 
combination  of  houses  that  would  agree  to  entrust  the  care  of 
their  particular  interests  to  such  agents  in  common.  Sent  out 
on  a  general  circuit  of  the  South  American  states,  the  "  sales- 
man-at-large  "  should  familiarize  himself  with  the  laws  and  cus- 
toms, as  well  as  the  tastes  and  needs,  of  the  region  in  general. 
Then,  having  fixed  upon  the  localities  that  might  seem  to  offer 
a  lucrative  market  for  the  goods  of  the  firm  or  firms  which  he 
represents,  he  should  devote  more  detailed  attention  to  a  group 
of  states  or  even  to  one  of  the  larger  countries  alone.  While 
never  missing  an  opportunity  to  place  large  orders,  the  circuit 
agent  should  leave  the  routine  work  of  selling  to  the  ordinary 
salesmen.  Whenever  practicable,  also,  he  should  be  allowed  to 
supervise  the  operations  of  these  salesmen  and  to  give  them 
such  instructions  as  an  acquaintance  with  conditions  on  a  larger 
scale  might  suggest.  Finally,  the  circuit  agent  should  send  home 
periodical  reports  of  his  various  activities. 

Not  only  for  this  class  of  business  representatives,  but  also  for 
the  ordinary  salesmen  who  may  be  employed  in  South  America, 
certain  qualifications  are  indispensable,  although  the  former  of 
course  should  possess  them  in  a  more  eminent  degree.  The 
qualifications  are  the  following:  first,  a  thorough  familiarity 
with  the  goods  in  hand ;  second,  a  well-developed  faculty  of 
practical  observation  and  description;  third,  a  fluent  command 
of  the  language;  fourth,  a  preliminary  acquaintance,  obtained 
by  a  proper  amount  of  study  in  the  United  States  itself,  with 
the  conditions,  commercial  and  otherwise,  prevailing  among  the 
various  countries  of  South  America,  and  with  the  characteristics 
of  the  different  nationalities  and  classes  in  that  continent ;   and 


692  POLITICAL  SCIENCE  QUARTERLY  [Vol.  XXIV 

fifth,  an  easy  adaptability  to  South  American  habits  and  tem- 
perament, along  with  a  corresponding  ability  to  subordinate  any 
provincial  American  sense  of  superiority.  Such  at  least  are  the 
ideal  qualities  to  be  desired  in  circuit  agents  and  salesmen,  but 
if  one  of  them  has  to  be  omitted  let  it  be  the  knowledge  of  the 
languages.  A  smattering  of  Spanish  and  Portuguese  avails  far 
less  than  the  practical  ability  to  establish  a  market  in  the  coun- 
try concerned.  Aided  by  an  interpreter,  a  good  salesman  can 
accomplish  vastly  more,  or  certainly  do  less  harm,  than  the  one 
who  may  be  deficient  in  practical  good  sense.  For  business 
purposes,  indeed,  neither  of  the  two  languages  presents  great 
difficulties  to  an  intelligent  man  who  really  wishes  to  learn  them. 
In  a  few  months  he  can  acquire  a  degree  of  fluency  extensive 
enough  to  enable  him  to  sell  goods,  if  he  is  otherwise  qualified 
to  sell  them.  Should  Americans  possessed  of  such  qualifica- 
tions be  unobtainable  in  sufficient  numbers,  there  are  plenty  of 
expert  German  salesmen  who  would  be  quite  willing  to  repre- 
sent American  business  houses  in  South  America. 

Furthermore,  the  delays  incident  to  the  actual  shipment  to 
South  American  countries  of  commodities  ordered  through  the 
head  office  in  the  United  States  directly,  and  not  through  the 
medium  of  responsible  agents  in  the  localities  concerned,  might 
be  removed  by  a  gradual  introduction  of  the  several  features  of 
our  contract  system.  By  degrees,  also,  it  may  readily  become 
possible  to  block  out  the  South  American  countries  geo- 
graphically. Under  this  arrangement  each  agent  or  salesman 
would  be  authorized  to  make  the  agreements  or  contracts 
within  the  area  specifically  assigned  to  him,  final  approval  only 
being  reserved  to  the  head  office  in  the  United  States. 

Wherever  practicable  the  American  exporter  should  estab- 
lish branch  houses  in  South  America,  rather  than  avail  himself 
of  the  services  of  local  agents,  native  or  European.  By  so 
doing  he  will  avoid  a  repetition  of  the  mistake  that  so  many 
of  his  class  are  now  making  in  Germany,  where,  instead  of  hav- 
ing the  goods  handled  directly  by  branch  concerns,  they  are 
shipped  to  German  importers  whose  abnormally  high  rates  of 
profit  are  not  altogether  consistent  with  their  denunciation  of 
the  new  American  tariff.     Moreover  it  might  be  well  for  Amer- 


No.  4]  OUR  SOUTH  AMERICAN  TRADE  693 

ican  exporters  interested  in  South  American  trade  to  form  a 
sort  of  syndicate  for  the  general  operations  of  sale  in  any  par- 
ticular country  or  countries.  They  could  establish  there  a 
central  agency  and  warehouse,  in  which  samples  of  their  goods 
might  be  displayed,  and  their  circulars,  catalogues  and  other 
means  of  affording  technical  information  might  be  used  to  the 
fullest  advantage.  If  in  any  place,  further,  there  be  main- 
tained by  native  enterprise  a  permanent  exposition  of  industrial 
products  in  their  various  stages  of  manufacture,  the  American 
houses  doing  business  in  that  section  should  come  into  immedi- 
ate connection  with  the  persons  conducting  such  an  exposition. 

Whether  the  American  exporters  act  jointly  or  individually 
in  their  quest  of  South  American  trade,  they  should  keep  a 
reasonably  large  stock  of  goods  in  the  countries  themselves. 
These  should  consist,  not  only  of  articles  for  sale  and  exhibit, 
but  of  such  also  as  may  be  necessary  for  repair  and  replace- 
ment. Above  all,  our  merchants  should  have  in  every  field  of 
their  business  activities  in  South  America  a  complete  assort- 
ment of  samples ;  and  these  should  be  placed  in  the  hands  of 
able  salesmen  who  know  how  to  explain  the  operation  or  the 
utility  of  any  particular  article  and  to  expatiate  upon  its  merits. 

Such  are  some  of  the  general  principles  that  should  govern 
our  commercial  dealings  with  the  republics  of  South  America, 
The  time  to  apply  them  is  to-day,  not  to-morrow.  Our  mar- 
kets at  home  and  in  Europe  and  Asia  will  not  always  furnish 
an  adequate  outlet  for  what  we  are  capable  of  producing. 
Before  us  lies  the  trade  of  a  neighboring  continent,  as  yet 
hardly  touched.  We  ought  to  preempt  our  share  of  it  ere  the 
omnipresent  German  has  made  it  altogether  his  own. 

William  R.  Shepherd. 


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